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GMAC warns on mortgage business GMAC warns on mortgage business
(10 minutes later)
GMAC Financial Services has reported an increased loss for the third quarter and warned that its mortgage business, Rescap, may struggle to survive.GMAC Financial Services has reported an increased loss for the third quarter and warned that its mortgage business, Rescap, may struggle to survive.
The firm reported a loss of $2.52bn (£1.56bn), against a $1.6bn deficit a year ago, with Rescap losing $1.91bn.The firm reported a loss of $2.52bn (£1.56bn), against a $1.6bn deficit a year ago, with Rescap losing $1.91bn.
GMAC said there was "substantial doubt" as to whether Rescap could "continue as a going concern".GMAC said there was "substantial doubt" as to whether Rescap could "continue as a going concern".
GMAC was formerly part of General Motors. In 2006, GM sold a 51% stake in GMAC to Cerberus Capital Management.GMAC was formerly part of General Motors. In 2006, GM sold a 51% stake in GMAC to Cerberus Capital Management.
The car company still holds a 49% stake in GMAC.The car company still holds a 49% stake in GMAC.
Rescap was reported to be the seventh-largest mortgage lender in the US at the beginning of this year.
Analysts suggested it could follow lenders Washington Mutual and IndyMac who failed earlier this year.
"If GMAC can't provide the support that Rescap needs, then bankruptcy is an option for Rescap," said analyst Christopher Wolfe from Fitch Ratings.
'Unrelenting environment''Unrelenting environment'
GMAC has been hard hit by the US housing slump and the resulting credit crunch.GMAC has been hard hit by the US housing slump and the resulting credit crunch.
The company's chief executive, Alvaro de Molina, said that "economic and market conditions created an unrelenting environment for our business".The company's chief executive, Alvaro de Molina, said that "economic and market conditions created an unrelenting environment for our business".
"In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity.""In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity."
The company's car finance unit lost $294m in the three months to September, stemming from a rise in credit losses in North and Latin America. In the same period a year ago it had made a $554m profit.The company's car finance unit lost $294m in the three months to September, stemming from a rise in credit losses in North and Latin America. In the same period a year ago it had made a $554m profit.
GMAC has cut back its lending, and this has had an unwelcome knock-on effect on General Motors.GMAC has cut back its lending, and this has had an unwelcome knock-on effect on General Motors.
Earlier this week, GM said that the cutback in GMAC's lending was behind about half of the 45% fall in car sales seen during October.Earlier this week, GM said that the cutback in GMAC's lending was behind about half of the 45% fall in car sales seen during October.
"It was like someone turned off the lights," GM's North America sales chief Mark LaNeve said on Monday."It was like someone turned off the lights," GM's North America sales chief Mark LaNeve said on Monday.